What happens to money that’s spent before the family law property settlement is finalised?
If you’re going through a separation, one of the biggest questions is often: what happens to money that’s spent before the property settlement is finalised?
For many years, the courts used a concept called “add backs” to deal with this issue. However, a recent decision of the Full Court in Shinohara v Shinohara [2025] FedCFamC1A 126 has changed the way the law approaches money spent after separation but before a property settlement is complete.
What are “add backs”?
Property settlements can take months — sometimes years — to resolve. In the meantime, life goes on: bills still need to be paid, businesses rise and fall, and sometimes one person uses joint funds in ways the other doesn’t agree with, such as:
Paying legal fees from joint funds
Withdrawing large amounts of cash
Gambling or wasting money
Making questionable purchases (often referred to as “wastage”)
In the past, courts could “add back” this money — treating it as if it was still in the property pool. The idea was that a person who had spent money unfairly shouldn’t benefit from doing so, and the amount would be counted against their share of the property settlement.
What happened in Shinohara v Shinohara?
In Shinohara, the couple had a five-year marriage and an asset pool of about $616,000. Both agreed that money used for legal fees should be added back into the pool.
However, the Full Court took a different approach, particularly in light of the Family Law Amendment Act 2024, which updated Section 79(3)(a)(i) of the Family Law Act 1975 (Cth).
The Court held that because “notional property” (money that has already been spent) no longer exists, it cannot be included in the asset pool:
“The text of s 79(3)(a)(i) is clear. Only the existing property of the parties is to be identified and only that existing property is to be divided or adjusted.” [2]
The Court further clarified that while notional property cannot be “added back”, the way money was used can still be taken into account when assessing each party’s contributions and when making adjustments to ensure a fair outcome:
“As notional property does not exist, it cannot be identified to form part of the balance sheet recording the current items of the parties’ property.” [3]
What does this mean in practice?
This decision means courts can no longer simply “add back” money that’s been spent. Instead, they must take a holistic approach, considering:
Contributions: what each person has contributed to the relationship, financially and otherwise; and
Adjustments: changes made to ensure a fair outcome overall.
So, if one person spends joint money in a way that disadvantages the other, the court may compensate the other person by awarding them a larger share of what remains, rather than notionally adding the money back.
Why this matters for separating couples
This change highlights the importance of record keeping in the period after separation.
If one party alleges excessive spending, payment of legal fees, or wastage, they will need to plead their case clearly and provide evidence — showing when the spending occurred and how it affected the overall asset pool. In complex cases, forensic accounting evidence may be required to quantify the amounts involved.
In relation to legal fees, couples may also need to think carefully about how these are funded. It may be fairer for both to have equal access to joint funds, or alternatively, for both to fund their legal costs independently (for example, through litigation funding or personal assets).
The takeaway
The Shinohara decision represents a significant shift in how courts approach money spent unilaterally after seperation. While “add backs” as they were traditionally known may no longer apply, the court’s focus remains the same — achieving a just and equitable outcome for both parties.
However, what is considered just and equitable is ultimately subjective, and judges have a broad discretion when deciding how assets should be divided. This means that delaying your property settlement can increase uncertainty and make outcomes harder to predict. The best approach is to reach an agreement — or at least begin the process — as soon as possible after separation.